Newmont Mining Profits Drop; Beat Expectations On Lower Costs

Denver-based Newmont Mining Corp. (NYSE: NEM – $30.45) the world’s second-biggest gold miner, reported first quarter adjusted net income of $182 million, or $0.34 per share, compared to $229 million or $0.46 per share in the prior year quarter. This compares to consensus estimates of $0.20 per share. Revenue totaled $2 billion matching last year’s first quarter tally with higher volumes offsetting lower gold and copper pricing. Newmont also said that it generated free cash flow from continuing operations of $227 million, compared $344 million in the prior year quarter. The company was able to improved its gold extraction cost to $828 per ounce compared to $849 in the prior year quarter, and copper to $1.33 per pound compared to a year ago $1.73.

Newmont Mining seems well positioned for the next couple of years and the shares are now more interesting as a play on gold prices. The company’s unit operating costs have declined, in keeping with increased efficiencies and a more profitable mine portfolio. Its balance sheet is in respectable shape, with its financial leverage likely moderating some as equity builds over time as well as the possibility of some reduction in the company’s long-term debt. Moreover, Newmont’s mining properties are in politically stable and/or supportive regions (North and South America and the Australia/Asia Pacific areas) and as well as more volatile African properties, supporting favorable longer-term prospects. The shares, reaching an intra-day 52-week high of $31.75, can be retained with a 5% allocation in an aggressive account.